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Include cash rewards in employees’ taxable income

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Q. When we win contracts, we recognize employees with cash awards. But these awards may be given to only the select few employees involved. Is this legally OK? —G.J., Alabama

A. It's certainly legal to reward individual employees with bonuses for good job performance. Just make sure you never provide “off-the-books” cash payments to employees. That means cash awards must be included in employees' W-2 earnings for tax purposes, and they must be included in the employees' “regular rate of pay” for determining overtime compensation.

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